ITV plc’s (LON:ITV) trading update next Wednesday could draw some inspiration from STV Group PLC’s (LON:STVG) first quarter numbers last week, according to analysts at Liberum.
In a note on 24 April, the broker said STV’s less-bad-than-feared drop in national airtime (TV) advertising revenue, which was expected to fall between 1% and 2% for the quarter as opposed to previous guidance of a 5% decline, provided “many positive read across points” for the FTSE 100 broadcaster.
READ: STV predicts growth in first quarter ad revenue as national advertising performs better than expected
“[The forecast] suggests that either May has been a very positive month and / or that March / April turned out better than expected”, Liberum said, adding that as STV holds the licence for the ITV1 channel in most of Scotland, the company’s TV ad revenues corresponded “exactly” with the advertising performance of ITV1, which they estimated made up around 63% of ITV’s total advertising revenue.
Analysts also said that the improved results should mitigate concerns around the impact of Brexit and other political uncertainty on the spending of advertisers.
In fact, Liberum said STV’s figures suggested that advertising spend had actually been “better than expected” in the period, with possible explanations including “increased government advertising on Brexit, possible share gains in TV advertising from other channels driven by ITV's strong audience share price performance and/or increased tactical spending in areas such as online”.
As national TV advertising forms around 84% of ITV’s total revenue from adverts, Liberum said STV’s performance “should be seen as a clear - and concrete - positive” for the broadcaster.
The comments mark a change in tune from the broker since its last note on ITV at the start of April, when it cut its target price to 190p from 240p after ITV warned in February that Brexit uncertainty and no World Cup football boost would hold back profits in the first half of 2019.